Government Banking Officials Discuss Financial Overhaul

By: Javi Calderon
Government Banking Officials Discuss Financial Overhaul

Human beings have a natural fear for the unknown, a natural pessimism for what may lie ahead – a heady, defensive quality that very well may have allowed us to survive and thrive thousands of years ago when we competed amongst the animal kingdom.

So understandably, the contentious Dodd-Frank financial reform that threatens to sweep away the rules and models that guided our nation’s burgeoning economic empire, (and ultimately contributed to its virtual collapse) has many of the country’s bankers spooked over the changes to come.

On Tuesday, March 22nd, Elizabeth Warren and Sheila Bair (head of the nascent Consumer Financial Protection Bureau and chair of the Federal Deposit Insurance Corporation, respectively) spoke to a national convention of thousands of community bankers gathered in San Diego, California, hoping to ease their fears.

Both Warren and Bair believe the new plan will ultimately benefit small, local banks.

Warren stated that help will come by leveling the playing field by holding all providers of financial products to the same criteria for consumer protections. Community banks, financial firms, credit unions and even payday loan lenders will have to offer financial products under strict consumer-friendly guidelines.

The new bureau – under Warren’s direction – will be tasked with regulating and supervising the country’s big banks, while keeping tabs on thousands of non-bank companies that offer products like mortgages, cash advance loans, car title loans and student loans, to make sure they’re following the rules, as well.

Bair, a Republican, pointed out that many of the issues that caused the financial crisis – unregulated credit, the process of securitization, unbalanced leverage, the sure-fire belief in big banks – still need to be fixed, but she also believes that the Dodd-Frank is a strong step towards fixing many glaring issues in the country’s banking system.
Bair also argued that consumers distrust in big banks after the financial crisis will lead to the growth and success of community banks as banking systems stabilize and begin to pick up steam.

Considering that the community banks are not at fault for the debacle, their policies and procedures will go relatively un-scrutinized, according to Bair. The goal of the CFPB will be to make sure that big banks and non-bank financers provide products that are consumer friendly.